The word platform is almost a buzzword in business these days. But what, exactly, is it? If you think of it in literal terms, a platform is merely a structure made up of “planks,” or integrated features. Take Google, for example. In 1998 Google was a really neat search engine, but it wasn’t a true platform company until it added more planks. Now Google’s platform comprises planks such as Gmail, Maps, Docs, Voice, YouTube, and countless others.
Compare today’s platform companies with businesses based on the 20th-century model, which produce one or more closely related products or services, and then use marketing to attract customers to them. This is an antiquated model that can’t compete with 21st-century, platform-based companies. Why? Because platform companies integrate an ever-widening universe of users, consumers, and partners into their ecosystems. It’s consumers who drive platforms; the enterprise-driven model merely tries to lure customers.
So how do you transform your business into a platform-based company–and why should you?
Here are five benefits according to Phil Simon, author of four management books. His fourth, The Age of the Platform: How Amazon, Apple, Facebook, and Google Have Redefined Business, is his most ambitious yet. A recognized technology expert, he advises companies on how to optimize their use of technology.
Platforms boost innovation.
All companies have limited resources for research and development. But by building a powerful platform, you can cultivate an ecosystem of developers, partners, users, and other collaborators who contribute to — and may drive — innovation at your company.
Consider Apple’s app explosion. The company invited thousands of users to develop iPhone and iPad apps, and by doing so, generated billions in new revenue. Opening up product development to outsiders has generated an endless stream of inventors and innovation.
How to apply this: Tools such as application programming interfaces (APIs) and software development kits (SDKs) will only get you halfway there. In addition, create incentives for prospective partners to extend your platform and build different planks for your mutual benefit. What might your company’s infrastructure offer an outsider that would benefit both of you?
Platforms make you change-ready.
Platform companies are quicker to adapt to changes in the market and consumer demand than their traditional counterparts. Because a platform company’s core products and services frequently change, it keeps employees nimble and resilient. Bad habits are less likely to become ingrained in the culture.
Amazon is a good example. It began as a bookseller, then branched out into selling other products. In 2007 the company launched the Kindle, and three years later it started publishing ebooks. In 2011 it introduced a tablet, the Fire, to compete with Apple’s iPad. Amazon’s employees have become great at changing direction on a dime.
How to apply this: Make change-readiness a condition of employment. Train employees to recognize and correct their resistance to change, and encourage them to come up with new product and service ideas (planks) to expand your platform on a regular basis.
Platforms minimize risk.What if your company only does one thing and the whole industry moves to China? Or what if consumer demand for your offerings suddenly dries up? No problem if you are a platform-based company. Platforms encourage diversification, and thus reduce risk.
If Apple had remained only a manufacturer of stylish, expensive computers, its stock prices would not be soaring, as they are now. But Apple’s multi-planked platform extends into music, telecommunications, media, commerce, entertainment, and education, among others. The company can withstand most surprises the market sends its way.
How to apply this: Seek out business partners who have complementary interests and a good infrastructure already in place. See if you can start a new line of offerings that benefit both companies and diversity your customer base.
Platforms build stronger brands.
It’s a no-brainer–the more customers and types of customers you have using your products, talking about your products, and even co-creating your products, and greater your brand awareness becomes.
Look at Facebook, for instance. Facebook began as a social networking site for college kids, but innovated and expanded its offerings to include business and marketing sites, community gaming sites, email, instant messaging, groups, blogs, advertising, consumer data mining, and much more. Has anyone not heard of this company?
How to apply this: Find new and creative ways to extend your brand. One way to do this is to ask trusted customers and clients what services or products they’d like to see you offer.
Platforms generate more customers.
More products and services mean more customers. Period.
How to apply this: Brainstorm with your employees to come up with ways you can cultivate more followers. An interactive website is a necessary plank for your platform. What about starting a blog that offers useful tips and tools? Turn your customers into a community and you’ll soon have more of them.